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Helmerich & Payne (HP) Posts Wider-Than-Expected Loss in Q2

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Contract drilling services provider Helmerich & Payne Inc. (HP - Free Report) reported net operating loss per share for the second quarter of fiscal 2017 – excluding special items – of 47 cents, wider than the Zacks Consensus Estimate of a loss of 41 cents. The underperformance could be attributed to lower drilling activity, especially in the international markets. The bottom line also compares unfavorably with the year-ago adjusted loss of 24 cents

Revenues of $405 million was down 7.5% from the fiscal first quarter of 2016 but beat the Zacks Consensus Estimate of $391 million.

Helmerich & Payne, Inc. Price, Consensus and EPS Surprise

 

Segment Performance

U.S. Land: During the quarter, operating revenues totaled $331 million (82% of total revenue), down 5.2% year over year. While average rig revenue per operating day was $22,654 – 33.8% below the year-ago period, average rig margin per day was up 10.4% to $15,612. Utilization levels increased to 42% (from 31% in the fiscal first quarter of 2016). However, the segment recorded an operating loss of $30.9 million due to increased operating expenses. In the year-ago quarter, income from the unit was $62.5 million.

Offshore: Helmerich & Payne’s Offshore revenues were up 5.5% year over year to $36.2 million. Daily average rig revenue rose 28.6% to $36,006 and average rig margin per day jumped 47.2% to $10,817. These positive factors led to the segment operating income of $5.9 million, up 79% from the prior-year recorded figure of $3.3 million. However, rig utilization declined to 77% from the year-ago level of 84%.

International Land: Helmerich & Payne’s International Land operations recorded revenues of $34.7 million, down from $51.3 million in the prior-year quarter. Average daily rig revenue was $37,340, up 1.6% from the corresponding period last year, while rig margin per day was $3,691, lower than the $10,487 earned a year ago. Rig utilization was down to 25% compared with 38% in the prior-year quarter.  The segment reported an operating loss of $11 million, wider-than-expected loss of $2.3 million in the prior-year quarter.

Capital Expenditure & Balance Sheet

During the quarter, Helmerich & Payne spent approximately $93 million on capital programs. As of Mar 31, 2017, the company had approximately $741.7 million in cash, while long-term debt was $492.4 million (debt-to-capitalization ratio of 10.1%).

Guidance

For the U.S. Land Operations, average rig revenue per day is expected to be roughly $21,000. For Offshore operations, average rig margin per day expected to be approximately $12,500. For International Land Operations, average rig margin per day expected to remain under $4,000.

Zacks Rank & Key Picks

Helmerich & Payne currently carries a Zacks Rank #3 (Hold).

Better-ranked players in the broader industry include Penn Virginia Corporation , Bellatrix Exploration Ltd and Cenovus Energy Inc. (CVE - Free Report) . All the three companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Penn Virginia posted a positive average surprise of 36.67% in the last four quarters.

Bellatrix posted a positive average surprise of 58.54% in the last four quarters.

Cenovus posted a positive average surprise of 74.89% in the last four quarters.

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